Critical Insurance Issue for Contractors and Developers Before Oregon Court of Appeals

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An appeal in the case Fountaincourt Homeowners' Association v. Fountaincourt Development, LLC, et al. is currently being briefed in the Oregon Court of Appeals. The case involves a condominium owner's association which prevailed on its construction defect claims against a contractor. The contractor's insurer, American Family Insurance Company ("American Family"), is challenging the trial court's ruling that American Family is obligated to pay the judgment against the contractor. The wrong decision in this case could negatively impact insurance coverage of contractors and developers in Oregon. For example, contractors and developers could find themselves in a position of essentially being without coverage, even though they paid for and obtained insurance.

Among other things, American Family seeks a ruling that, where portions of an underlying judgment are covered and others are uncovered, it is the insured's burden to prove which is which. In other words, the insurer wants the contractor to bear the burden of establishing which damages for defective construction are covered by the insurer's insurance policy. As a practical matter, in construction defects lawsuits this usually is not possible. American Family's position is that if the insured cannot meet this burden, there is no insurance coverage. If the Court of Appeals agrees with American Family, contractors and developers can expect their insurers to refuse to pay for any judgment where there is not clear evidence of the amount and type of damages that are covered by the policy.

Because this issue is of critical importance to Oregon contractors and developers, a group of industry members have agreed to try to help fund the filing of a special "amicus" brief before the Court of Appeals to emphasize the importance of the issue to the construction and design industry. Coverage attorney Mike Farnell of Parsons Farnell & Grein, LLP is preparing the brief, but your contributions are needed to fund the legal expense. The goal is to raise $50,000. Stoel Rives itself has agreed to contribute to this fund. We urge you to contribute to the legal fund and add your voice to those arguing for Oregon's contractors and developers.

If you have any questions or are willing to contribute, please contact any of the members of Stoel Rives construction and design team.

Key Contributors

Louis A. Ferreira
Sean C. Gay
Eric A. Grasberger
Guy A. Randles
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